Fred Thomas Investments Limited (in receivership and in liquidation) v Rural News Group Limited

[2012] NZHC 671

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-4482 [2012] NZHC 671

BETWEEN  FRED THOMAS INVESTMENTS LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

Plaintiff

ANDRURAL NEWS GROUP LIMITED Defendant

Hearing:         18 November 2011

Counsel:         M Arthur and J Learner for Plaintiff

A Hopkinson for Defendant

Judgment:      5 April 2012 at 4 pm

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Summary Judgment)

This judgment was delivered by me on 5 April 2012 at 4:00 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Chapman Tripp, PO Box 2206, Auckland

Cooney Lees Morgan, PO Box 143, Tauranga

FRED THOMAS INVESTMENTS LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) V RURAL NEWS GROUP LIMITED HC AK CIV-2011-404-4482 [5 April 2012]

Introduction

[1]      The liquidators of the plaintiff, Fred Thomas  Investments  Ltd,  apply for

summary judgment on the plaintiff’s claim against the defendant, Rural News Ltd.

[2]      The claim is essentially that Rural News is in breach of its obligations under a lease in failing to pay rent for the period 1 March 2010 to 31 December 2010.  The amount  of  rent  claimed,  together  with  outgoings  payable  under  the  lease,  is

$82,085.68.

[3]      The application for summary judgment is opposed.   Rural News contends that it has an arguable defence based on promissory estoppel.

[4]      The broad issue for determination is whether such defence is indeed arguable or whether the plaintiff’s liquidators have demonstrated that the defence is not available.    If  the  former,  the  claim  should  go  to  trial  and  summary  judgment declined.   If the latter, the liquidators will be entitled to judgment for the amount claimed.

Background

[5]      Rural News is a publishing company.  It leased commercial premises on level one at 4 Fred Thomas Drive, Takapuna from the plaintiff, the owner of the property.

[6]      As at November 2009 the lease had approximately one year to run (the expiry date being 31 December 2010).  At that time, Aon New Zealand Ltd, another of the plaintiff’s tenants, wanted more space. It asked the plaintiff about the possibility of taking over the space leased by Rural News.

[7]      The plaintiff suggested that Aon approach Rural News itself. When Aon did so, by email on 17 November 2009, Rural News told Aon it would be willing to move out.

[8]      Rural News considered the possibility of leasing a different space on another floor of the plaintiff’s building at 4 Fred Thomas Drive.  Ultimately however, Rural News preferred other premises which it first viewed in December 2009 that were closer to Takapuna.

[9]      Rural News did not commit to sign the lease of those new premises until

15 January 2010.  By then, it had prepared a draft assignment of lease at the request of the plaintiff, for Aon and the plaintiff to sign.  It says that on 15 January 2010 it told the plaintiff and Aon that it was entering into the new lease in reliance on their assurances regarding the lease assignment to Aon.  That same day it signed the new lease agreement and it authorised building work to commence on its new premises. It vacated the old space on 1 March 2010 and at that point ceased paying rent to the plaintiff.

[10]     Unbeknown to Rural News, Aon was dissatisfied with the terms on which it was required to take the assignment and it did not resolve key terms relating principally to renovations with the plaintiff.  Though discussions continued between Aon and the plaintiff after Rural News’s departure, no agreement on the terms of assignment or a new lease was ever reached.  The discussions deteriorated and never got back on a positive footing.   In July 2010  the plaintiff’s directors  left New Zealand and on 1 September 2010 the plaintiff was placed into receivership.   On

19 November 2010, the plaintiff was put into liquidation.

[11]     Rural News’ space remained vacant and unlet when the plaintiff’s property

was sold on 17 December 2010.

The Claim

[12]     The plaintiff commenced this proceeding on 21 July 2011.  It says its case is a clear cut claim for breach of lease and can be succinctly stated as follows:

(a)      Rural News asked it to consent to an assignment of the lease to Aon.  It indicated it would give consent;

(b)Rural  News  vacated  the  premises  without  obtaining Aon’s agreement to any assignment.  The premises were left empty from 1 March 2010 to 17 December 2010 (when the property was transferred to the new owner); and

(c)      Throughout the period, Rural News remained liable under the lease for unpaid rental arrears and operating expenses.

The grounds of opposition

[13]     In its grounds of opposition, the defendant suggests a tripartite agreement which provided that the defendant would vacate the premises by 1 March 2010 when Aon would occupy and take the lease.   The defendant claims that, relying on the assurances of the plaintiff and Aon that Aon would take over the lease, it entered into a new lease for separate premises.  The defendant claims that the plaintiff and Aon were advised that it was entering into a new lease in reliance on the assurances given.  Neither the plaintiff nor Aon objected to the defendant entering into a new lease following this advice.

[14]     The defendant also claims that it was told by the plaintiff that Aon would take over the defendant’s lease by an assignment of lease.  The defendant argues that the assurances given by the plaintiff prior to the defendant entering into the new lease, and the conduct of the plaintiff following the defendant entering into the new lease, were representations that the obligations under the lease would not be enforced against the defendant after 1 March 2010.

The issues

[15]     Though the overall onus is on the plaintiff to prove its case on the balance of probabilities and to show that there is no real question to be tried, there is no dispute that it has proved its claim on a prima facie basis. It is for Rural News to lay a sufficient evidential foundation to show that its defence is arguable and therefore that its opposition to summary judgment is justified. At the hearing it became clear

that the defendant’s opposition is based essentially on an estoppel argument that

turns on two key issues:

a)       Whether the plaintiff promised or represented by words or conduct,

that Rural News’ lease would be assigned or transferred to Aon; and

b)Whether  the  promise  or  representation  caused  the  defendant  to commit to its lease of new premises on 15 January 2011.

[16]     There is no dispute that if such a promise was made and the promise caused Rural News to commit to its new lease and thus to act to its detriment, it will have a defence that it should not be held to its obligations under the lease for ceasing to pay rent. It will have a defence founded on estoppel.

[17]     I turn presently to these issues for summary judgment.   I refer first to the legal principles governing such an application.  They are not in dispute.

Legal principles on summary judgment and estoppel

[18]     The plaintiff’s application for summary judgment is made under rr 12.2 and

12.3 of the High Court Rules.  Relevantly, r 12.2 provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

…

[19]     The legal principles applying to applications for summary judgment were succinctly expressed by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26]:

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is

no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ

84 (CA).

[20]     In Krukzeiner the Court of Appeal also discussed the essential elements of estoppel.  Relevantly, it noted that the doctrine is concerned with circumstances in which the court will enforce a voluntary promise to refrain from exercising pre- existing legal rights.1

[21]     The Court of Appeal states:

Promissory estoppel

[37]     Promissory estoppel was traditionally concerned with promises to refrain from exercising pre-existing contractual rights: Ajayi v R T Briscoe (Nigeria) Ltd [1964] 1 WLR 1326 (PC). The promise had to be clear and unequivocal: Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] 1 AC 741 (HL) at 768. The legal rights were suspended and might be resumed on giving notice, so long as the promisee could resume its former position: Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India [1990] 1 Lloyd's Rep 391 (HL) at 399.

[22]     I turn to the issues.

Discussion

[23]     Counsel agree that whether the plaintiff did make the alleged promise turns on the effect of two emails sent by Mr Don Lee sent on its behalf on 23 December

2009 and 13 January 2010.  Specifically, whether the emails set out:

a)        Clearly and unequivocally that the plaintiff consents to an assignment

and that it has Aon’s agreement to take up the assignment; and

1            Krukzeiner v Hanover Finance Limited [2008] NZCA 187 at [37] - [40].

b)A promise that there would be an assignment is to be inferred from such advice.

[24]     The effect of the two emails is to be objectively assessed in context. Their context, or at least the context to which counsel have referred, comprises a chain of emails between the plaintiff and defendant beginning on 23 December 2009.

[25]     I begin with Mr Don’s email of 24 December 2009.  Mr Don states:

Hi Brian

Thank you for your notice.  I have informed Iain of your intention.  I will take a formal process of lease assignment so that you could move out on

1/03/2010.

Have a wonderful christmas and happy new year. Kind regards

Don

[26]     The email was in response to an email that Mr Hight sent on the previous

day, 23 December 2009.  Mr Hight’s email states:

Subject: RE: Lease – 4 Fred Thomas Dr

Don, as you know we have been asked by Iain Tulloch of Aon if we would vacate our space for them to take over.

This I have agreed to and hereby give notice to vacate our lease 1 March

2010.  Would you please discuss the detail with Iain as he is waiting for your call.

Thank you for your effort in offering us the ground floor but I am under pressure to move closer the Takapuna.  The new lease I have is closer to the facilities.

[27]     I pause to note that the new agreement to lease which Mr Hight referred to was already prepared in draft form.  It contained special conditions which indicate that Mr Hight had in mind that Rural News ought to have the plaintiff and Aon sign a deed of assignment before committing itself to the new lease. The conditions provided that the new agreement was conditional upon:

(a)      the tenant’s solicitor’s approval within two (2) working days of the

date of the agreement; and

(b)the tenant assigning its lease at Fred Thomas Drive to Aon, “such assignment to be signed by 24 December 2009.”

[28]     There were no further emails exchanged by the plaintiff and Rural News until

13 January 2010.

[29]     On 13 January 2010 Mr Lee sent an email in response:

Subject: Lease assignment

Dear Brian

Your proposal of lease assignment has been granted by the landlord.   I advise you arrange for your lawyer to prepare a ‘deed of assignment of lease’ between Rural News and Aon.

Regards

[30]     On the following day Mr Lee also wrote to Aon by email:

Subject: Re: Rural News Tenancy

Hi Iain

I confirm:

1.The proposal of lease assignment from Rural News has been granted and we propose that Aon takes over the Rural News lease via an assignment agreement.

2.We wish to just sign on the separate assignment agreement between Rural News and Aon for the remaining term of Rural News existing lease as the landlord.

I have advised Brian of this as below on Tuesday 12/01/10. 2

Regards

Don

2            Though the email refers to 12 January it is common ground the correct date was 13 January.

[31]     There followed, on 15 January, an email from Mr Hight to Mr Lee and Aon. Mr Hight wrote:

Subject:  Re: Assigning Aon Lease

Iain and Don

I’ve  prepared  and  given  a  Deed  of  Assignment  to  Shelley  at  AON  for

signing.  Then Don if you could action it your end.

The Deed is a standard form, with change over 1 March 2010.  I’ve included

a clause for extension of time if my new premises are not ready by that time.

I have given them the go ahead today and work is to start immediately. They have given assurances the premises should still be ready by the deadline.

I have taken the action to proceed with the new lease in good faith based on our previous correspondence.

Regards

Brian Hight

[32]     In his evidence Mr Hight places considerable reliance on the email exchange of  13  and  15  January  2010.    He  says  that  he  committed  to  the  new  lease  on

15 January 2010.  He suggests that there was nothing which indicated that he should not proceed to commit to the new lease.  Mr Hight deposes that on 15 January 2010 he emailed Mr Lee and Aon stating that a deed of assignment had been provided to Aon for signing.  Mr Hight also deposes that in the same email he had given the new landlord the go ahead in good faith based on the previous correspondence with Aon and Mr Lee.  After hearing nothing from Aon or Mr Lee in response to the email, Mr Hight signed the agreement to lease the new premises on 15 January 2010.

[33]     The position with Aon was not, however, clear cut or finalised.   Mr Lee deposed that the plaintiff never received a deed signed by Rural News and Aon, and that the draft deed stated the wrong name of the landlord.  Aon was dissatisfied with the terms on which it was required to take the assignment and Mr Lee deposed that by early February it looked unlikely that the proposed assignment would take place. Mr Lee emailed Rural News reminding them that their obligations under the lease would remain in place until either the lease was formally signed to Aon or the expiry of the lease on 31 December 2010.

[34]     Such is the context of the emails.

Analysis

[35]     I am of the opinion that on a proper and objective construction of the email correspondence, there was never a clear and unequivocal promise as contended by the defendant.   The emails that Rural News relies upon do not amount to a representation that Rural News’ lease would be assigned or transferred to Aon.

[36]     In the email dated 24 December 2009, Mr Lee states that “I will take a formal process of lease assignment so that you could move out on 1/03/2010.”  This is not a representation that Rural News’ lease would be assigned to Aon.  On an objective analysis of the email, Mr Lee represented that he would take a “formal process of lease  assignment”  under  which  Rural  News  “could”  move  out.    The  fact  that Mr Hight did not give his new landlord confirmation at this stage demonstrates that he understood the importance of this.

[37]     In the email dated 13 January, Mr Lee states that the “proposal of lease assignment has been granted by the landlord” and advises Mr Hight to “arrange for your lawyer to prepare a ‘deed of assignment of lease’”. This advice contains no implication that the landlord had gained Aon’s actual agreement to the assignment. Nor does it contain an implication that the landlord would make arrangements for Aon to sign the assignment.  The email is not, therefore, a promise or representation that Rural News’ lease would be assigned to Aon.  On an objective analysis, Mr Lee represented in this email that the landlord granted a “proposal of lease assignment”, which he then advised Mr Hight to prepare.  A representation granting a proposal of a lease assignment falls short of a representation that a lease would be assigned.

[38]     On 14 January 2010 Mr Lee wrote to Mr Tulloch of Aon and confirmed that the proposal of lease assignment had been granted.  For two reasons, this email is not a promise or representation to Rural News that the lease would be assigned or transferred to Aon.  First, the email was not sent to Rural News and therefore cannot be a promise to it.   Secondly, even if it had been sent to Rural News, it merely

reiterated the position of the 13 January 2010 email which, as discussed, does not constitute a clear and unequivocal promise.

[39]     Mr Hight then arranged for a deed of assignment of lease to be prepared.  On

15 January 2010, Mr Hight informed Messrs Lee and Tulloch that the deed was ready to be signed and instructed Mr Lee to “action it your end”.  Mr Hight heard nothing further in response and signed a lease agreement for the new premises. However, there is nothing to suggest that silence on the part of Messrs Lee and Tulloch could constitute a representation that Rural News’ lease would be assigned or transferred to Aon.

[40]     Even if the emails did convey clear and unequivocal promise as contended by the defendant, they did not cause the Rural News to change its position.  Rural News had already given notice on 23 December 2009, prior to receiving the emails of

24 December 2009 and 13 January 2010.   On 15 January 2010, the same day that Mr Hight informed Messrs Lee and Tulloch that the deed was ready to be signed, Mr Hight also signed the lease for the new premises.   As his evidence indicates, Mr Hight had already given the new landlord the “go ahead” on that day.

[41]     Rural News has failed to establish an estoppel because assignment of the lease  was  ultimately  dependent  on  the  actions  of  Rural  News  and  Aon.    The plaintiff’s role in the process of assignment was to give its consent to the assignment once it had been agreed between the Rural News and Aon.  The plaintiff could not and did not represent a clear and unequivocal promise that Rural News’ lease would be assigned or transferred to Aon.

Result

[42]     I am satisfied the defendant has no arguable defence to the entry of judgment on liability in these proceedings.  The defendant is in breach of its obligations under the lease.

[43]     The  plaintiff  is  entitled  to  summary  judgment  on  its  claim  against  the defendant for the sum of $82,085.68 for outstanding rent and outgoings. I order accordingly.

[44]     Costs are reserved. The plaintiff is to file and serve a memorandum as to costs within 5 working days. The defendant is to file and serve any memorandum in reply within a further 5 working days. I will then deal with any issues as to costs on

the memoranda unless either side requests otherwise.

Associate Judge Sargisson